Electricity is by its nature difficult to store and has to be available on demand. Consequently, unlike other products, it is not possible, under normal operating conditions, to keep it in stock, ration it or have customers queue for it. Furthermore, demand and supply vary continuously. There is therefore a physical requirement for a controlling agency, the system operator, to coordinate the dispatch of generating units to meet the expected demand of the system across the transmission grid. If there is a mismatch between supply and demand, the generators speed up or slow down causing the system frequency (either 50 or 60 hertz) to increase or decrease. If the frequency falls outside a predetermined range the system operator will act to add or remove either generation or load. In addition, the laws of physics determine how electricity flows through an electricity network. Hence the extent of energy lost in transmission and the level of congestion on any particular branch of the network will influence the economic dispatch of the generation units.
The scope of each electricity market includes the transmission grid or network that is available to the wholesalers, retailers and the ultimate consumers in any given geographic area. Markets may extend beyond national boundaries.
In order to insure consistent and reliable delivery of electricity to businesses, hospitals, homes, etc., electricity markets are structured to efficiently and timely effect transactions. In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use supply and demand principles to set the price. Most electricity markets, and many other markets, function in accordance with a bid-based security constrained economic dispatch model. Wholesale transactions (e.g., bids and offers) in electricity are typically cleared and settled by the market operator or a special-purpose independent entity charged exclusively with that function. Market operators do not clear trades but often require knowledge of the trade in order to maintain generation and load balance.
For an economically efficient electricity market to be successful it is helpful that a number of criteria are met, namely the existence of a coordinated spot market that has bid-based, security-constrained, economic dispatch. The system price in the day-ahead market is, in principle, determined by matching offers from generators to bids from consumers at each node to develop a classic supply and demand equilibrium price, usually on an hourly interval, and is calculated separately for sub-regions in which the system operator's load flow model indicates that constraints will bind transmission imports.
The theoretical prices of electricity at each node on the network is a calculated “shadow price”, in which it is assumed that one additional kilowatt-hour is demanded at the node in question, and the associated incremental cost to the system that would result from the optimized re-dispatch of available units establishes the hypothetical production cost of the hypothetical kilowatt-hour. This is known as locational marginal pricing or nodal pricing and is used in some deregulated markets, most notably in the PJM Interconnection, ERCOT, New York, and New England markets in the USA and in New Zealand.
As an illustrative example, new technology is available and has been piloted by the US Department of Energy that may facilitate real-time market pricing even down to the retail level. A potential use of event-driven service-oriented architecture (SOA) could be a virtual electricity market where, for example, home clothes dryers can bid on the price of the electricity they use in a real-time market pricing system. The real-time market price and control system could turn home electricity customers into active participants in managing the power grid and their monthly utility bills. Customers can set limits on how much they would pay for electricity to run a clothes dryer, for example, and electricity providers willing to transmit power at that price would be alerted over the grid and could sell the electricity to the dryer.
On one side, consumer devices can bid for power based on how much the owner of the device were willing to pay, set ahead of time by the consumer. On the other side, suppliers can enter bids automatically from their electricity generators, based on how much it would cost to start up and run the generators. Further, the electricity suppliers could perform real-time market analysis to determine return-on-investment for optimizing profitability or reducing end-user cost of goods.
Event-driven SOA software could allow homeowners to customize many different types of electricity devices found within their home to a desired level of comfort or economy. The event-driven software could also automatically respond to changing electricity prices, in as little as five-minute intervals. For example, to reduce the home owner's electricity usage in peak periods (when electricity is most expensive), the software could automatically lower the target temperature of the thermostat on the central heating system (in winter) or raise the target temperature of the thermostat on the central cooling system (in summer).
To realize such improved systems, stable, efficient electricity markets are desirable to insure consistent delivery of energy at prices that do not have dramatic changes. Therefore, what is needed are systems, methods and apparatus for improved operation of electricity markets.